The region’s medium-sized companies predict they will only survive the impact of COVID-19 by making radical changes to their businesses, according to a survey conducted by accountancy and business advisory firm, BDO.
Nearly two-thirds expect the jobs they cut now will never come back. This threatens to put into reverse the job growth driven by the UK’s mid-tier, which had created half a million new jobs in the previous 12 months.
In the first of a bi-monthly survey of 200 medium-sized businesses – which together represent £3.5 billion in revenues and more than 40,000 employees – BDO’s Re-thinking the Economy explores the impact of COVID-19 on these businesses and their plans for the future.
While 79 per cent expect to recover from the impact of COVID-19, more than half of those believe their businesses will be fundamentally different as a result. Since the start of the pandemic, 44 per cent of medium-sized businesses have launched new products, and nearly a third have shifted to a full online-only model.
Nearly half (42 per cent) of medium-sized businesses expect revenues to return to pre-COVID levels in less than a year, but the same number believe it will take up to three years for trading to recover. And the immediate future is not without challenges. Three quarters of mid-tier companies have less than six months of cash reserves. A similar number expect to continue using the Government’s furlough scheme until the end of October.
In a blow to the UK government’s drive to encourage more businesses to export, BDO’s findings also point to a smaller, more domestically focussed mid-tier. 42 per cent of businesses say they have stopped exporting and nearly half have reduced the number of services and products they offer.
The survey also found that Government support has played a key part in business survival. 83 per cent have made use of the Government’s business support measures in some way. 76 per cent felt they’d received adequate support from the Government during the crisis. The Covid-19 Corporate Financing Facility was the most used, with well over half of medium-sized companies drawing from it.
Richard Rose, head of BDO in the Midlands said: “The way in which medium-sized businesses in the Midlands emerge from the pandemic will play a huge part in the recovery of the region’s economy. We know that companies have been hit hard and job losses have been and will be a painful outcome. But it is encouraging to see that medium-sized businesses are confident about their overall prospects and are planning for long-term recovery. They are making swift changes to their operating models to give their companies the best chance possible, with some seizing the opportunity to expand into new areas.
“There is no denying that this will be a long haul and improvements will be gradual. Careful management of the transition to life without Government support will be critical. Medium-sized businesses are saying they are ready to take decisive action and are hopeful they will come through this, returning their businesses to pre-COVID trading levels.”
The UK’s overlooked and undervalued economic engine of mid-sized businesses will be at the heart of the UK’s economic recovery, say BDO. They must be listened to and supported if we are to speed up recovery.